The euro fell in European trade on Wednesday against a basket of major rivals, on track for the first loss in four days against the US dollar on growing concerns about the political situation in Germany after a difficult vote for the new German Chancellor Friedrich Merz.

Later today, the important Federal Reserve’s policy meeting is expected to provide clues on the path ahead for US interest rates.

The Price

The EUR/US price fell 0.35% today to $1.1325, with a session-high at $1.1374.

On Tuesday, the pair rose 0.45%, the third profit in a row as the odds of a June interest rate cut by the ECB fell.

Merz

During a vote in the German Parliament yesterday, the first session to vote failed to vote in German Chancellor Friedrich Merz for the first time in post-war Germany

It was surprising as the governing coalition has more than enough votes for a majority, showing some dissent.

The failure of the vote caused a shock and division among the Christian coalition, with some calling for an immediate second vote and others fearing the repeat of failure.

The Second Vote

During the hurriedly arranged second vote, Merz managed to get 325 votes, enough for a majority, thus being elected the German Chancellor.

However, the failure of the first vote caused concerns about the stability of the coalition and Merz’s ability to unite his parties.

The Fed

Today, the Federal Reserve will decide on monetary policies, expected to hold interest rates unchanged.

The Fed’s monetary statement and Chair Powell’s subsequent press conference will likely provide clues on the path ahead for policies.

US President Donald Trump continued to pressure Powell to cut interest rates, however he said won’t fire him before the end of term in May 2026.

According to the Fedwatch tool, the odds of a Fed 0.25% rate cut in May stood at just 8%.

The odds of such a cut in June stood at a healthier 65%.

The yen fell on Wednesday in Asian trade away from a week high against the dollar, and on track for the first loss in four days amid improving risk appetite in the markets following the launch of initial US-China trade talks in Switzerland.

Later today, the important Federal Reserve’s policy meeting is expected to provide clues on the path ahead for US interest rates.

The Price

The USD/JPY price rose 0.6% today to 143.31, with a session-low at 142.41.

The yen rose 0.9% on Tuesday, the third profit in a row, hitting a week high at 142.35 on active haven demand.

Positive Sentiment

Most Asian stock markets rebounded on Wednesday after China announced new monetary policy decisions while commencing trade talks with Washington.

The People’s Bank of China cut interest rates from 1.5% to 1.4%, while reducing reserve requirements for banks by 50 basis points.

Media outlets reported an upcoming meeting between US Treasury Secretary Scott Bessent and Chinese officials this week in Switzerland.

The Fed

Today, the Federal Reserve will decide on monetary policies, expected to hold interest rates unchanged.

The Fed’s monetary statement and Chair Powell’s subsequent press conference will likely provide clues on the path ahead for policies.

US President Donald Trump continued to pressure Powell to cut interest rates, however he said won’t fire him before the end of term in May 2026.

According to the Fedwatch tool, the odds of a Fed 0.25% rate cut in May stood at just 8%.

The odds of such a cut in June stood at a healthier 65%.

Goldman Sachs said in a memo that Fed officials would like more evidence from the labor market and other sectors before deciding to cut interest rates, with the bank expecting three 0.25% rate cuts in July, September, and October.

Most cryptocurrencies fell on Tuesday as investors look forward to the Federal Reserve’s policy decisions and their impact on the market.

The Federal Reserve’s policy meeting starts today with the central bank expected to hold interest rates unchanged despite Trump’s calls for a cut.

Amid continuous concerns about the trade war, Canadian Prime Minister Mark Carney asserted that Canada is not and will never be for sale during a meeting with Trump, who commented moments earlier that the US-Canada borders are artificial and hinted once again at joining Canada to the US.

Trump said that he won’t discuss the US acquisition of Canada with Carney, but said there would be “great benefits” to Canada if such a “wonderful marriage” occurred between the two countries. 

Trump told reporters that as a real estate developer, getting rid of the “artificial line” and joining the two countries would be “beautiful”.

However, Trump said this disagreement won’t impact their trade negotiations, also he asserted he won’t lift the tariffs on Canadian products.

Ethereum

On trading, ethereum fell 1.7% as of 21:11 GMT on Coinmarketcap to $1783.9.

The Canadian dollar rose against most major rivals following remarks by PM Carney in a press conference with US President Trump.

Amid continuous concerns about the trade war, Carney asserted that Canada is not and will never be for sale during a meeting with Trump, who commented moments earlier that the US-Canada borders are artificial and hinted once again at joining Canada to the US.

Trump said that he won’t discuss the US acquisition of Canada with Carney, but said there would be “great benefits” to Canada if such a “wonderful marriage” occurred between the two countries. 

Trump told reporters that as a real estate developer, getting rid of the “artificial line” and joining the two countries would be “beautiful”.

However, Trump said this disagreement won’t impact their trade negotiations, also he asserted he won’t lift the tariffs on Canadian products.

On trading, the CAD/USD rose 0.4% as of 20:56 GMT to 0.7262.

Aussie

The Australian dollar rose 0.5% against the greenback to 0.6499.

US Dollar

The dollar index fell 0.6% as of 20:22 GMT to 99.2, with a session-high at 100.1, and a low at 99.2.

The Federal Reserve’s policy meeting starts today with the central bank expected to hold interest rates unchanged despite Trump’s calls for a cut.